Citigroup Forecasts Brent Crude Could Plunge to $60 per Barrel by Christmas

Citigroup analysts have projected that Brent crude oil prices could fall to $60 per barrel by year-end, anticipating the U.S.-Iran ceasefire agreement will hold.

The bank's analysts stated in a Friday report that, despite intermittent conflicts, both sides have compelling reasons to adhere to the memorandum of understanding signed in mid-June.

They wrote, "We expect the memorandum to be maintained, not because trust has suddenly appeared, but because both sides have weak incentives to tear it up."

"Both the U.S. and Iran appear to show genuine war-weariness regarding conflict, and Lebanon, the actor most likely to cause significant disruption, is increasingly constrained by a U.S. preference for de-escalation."

The report advised traders to sell during summer price rallies and forecast that Brent crude would trade between $60 and $65 per barrel by the end of the year.

In mid-June, Goldman Sachs lowered its year-end Brent price forecast to $80 per barrel. Its commodities team highlighted in a recent report the rapid recovery of oil production in the Gulf of Mexico, suggesting it could return to pre-war levels by early July.

However, Goldman Sachs analysts remain more cautious than Citigroup's regarding the strength of Iran's motivation to uphold the ceasefire agreement.

Citigroup analysts noted that daily crude oil transit through the Strait of Hormuz has increased to 7 million barrels, up from 1.5 million barrels before the conflict.

They suggested that actual shipping volumes through the strait may be higher than official data indicates, as many vessels have turned off transponders for security reasons.

On Friday, Brent crude prices rose modestly by 0.9% to approximately $72.50 per barrel. The Brent January contract was trading around $73 per barrel, implying Citigroup analysts expect a steeper price decline than the broader market anticipates.

Since the U.S. and Iran agreed to halt hostilities, Brent crude has mostly traded below $80 per barrel.

On April 30th, oil prices peaked above $126 per barrel, marking the highest level since 2022.